Water, Water Everywhere

Once again at last night's county commissioner meeting, one of the commissioners bragged that NC-20, the lobbying organization funded in part by taxpayers of the 20 coastal counties, had successfully persuaded the Coastal Resources Commission not to adopt the report of the CRC science committee forecasting a sea level rise of as much as one meter (39 inches) by 2100.

She explained that adopting the report might withdraw 1.3 million acres in Eastern North Carolina from future use. She also explained that it might raise insurance rates.

My problem with that is, I am about to raise my house 36 inches. Before doing so, I would like access to the best available scientific assessment of sea level rise. That extra three inches could be crucial, if not to me personally, at least to my heirs.

Is ignorance better than knowledge? I don't think so.

If we build on 1.3 million acres that shouldn't be developed, who pays the damages when the water rises? Is NC-20 going to pick up the tab?

I don't think so. The rest of us will.

Yesterday's New York Times printed a very illuminating article about sea level rise, hurricane damage and the outer banks. Read it here.

Whenever a significant hurricane hits the banks, it makes new channels across the islands, severing roads and destroying bridges.

One sensible suggestion by scientists (who keep telling us that the outer banks aren't stable) is to replace the bridges with ferries.

It would be cheaper and more reliable.

By the way, there is no bridge to Okracoke and the tourist industry there does just fine.

Pamlico County Ferry Lobbyist

This morning at a brief 9 o'clock meeting, Pamlico County commissioners voted 4-3 to hire an experienced local lobbyist to undo the Republican legislature's measure establishing tolls on our two commuter ferries. Both ferries are shown in DOT transportation system maps as segments of state highway 306. The tolls, possibly as high as $7 per one-way trip across the Neuse, will be a heavy burden on workers who commute to and from Havelock.

The three commissioners who voted against hiring a lobbyist expressed doubt that the measure will succeed, and frustration that it wasn't attempted by our elected legislators. Commissioner Ollison expressed the view that the tolls are "a done deal."

My view: there is a risk of failure, but the consequences of the tolls on the county's economy are substantial.

In a democracy, there are no permanent "done deals."

South Avenue Deal

This evening, the Oriental Town Board of Commissioners by a unanimous vote of the four commissioners in attendance approved "in principal" to accept a counter offer by Mr. Chris Fulcher concerning the exchange of property. Details to be negotiated in a contract to be reviewed by the board. Public hearing to be held on the issue of vacating public rights of way currently owned by the town. The proposed map:

This is somewhat better than the earlier proposal here, but there still may be devils in the details. Lawyers for the two sides will negotiate.

Some commissioners, responding to skeptical comments by attendees, emphasized that the rights of way the town is giving up are "worth nothing." I think the truth is more complicated. To be sure, the town cannot sell the rights of way, because the town is not the owner of the underlying fee. But, if abandoned, there is clearly a tangible value to the land freed for sale, transfer or use by the fee owner. To truly understand the value to the recipient, it might be of interest to have a valuation of the real estate value of the land being abandoned by the town. Clearly it is not "nothing."

Earlier this week, the mayor spent a long time talking about the "intangible" benefits of the negotiation. I think the benefits to the public of public access to the water are a concrete benefit of living in the Town of Oriental, not just an "intangible" benefit. It is why people move here.

There were options open to the town had the Board wanted to use the existing South Avenue right of way to build a welcome center, public rest rooms, a museum, or any other purpose associated with public access to the water. It could, for example, have offered to purchase the underlying fee from the fee owner, either through negotiation or by exercising eminent domain. It might have been difficult and costly, but it would have been possible.

As it is, there will be building restrictions due to the fact that about half of the area to be donated to the town is within the 50 foot Neuse River Buffer and subject to building restrictions. It would be interesting to know what can be built there within those constraints.

A major advantage to the public of a dedicated and accepted right of way is that it cannot be sold, only abandoned. This provides better protection of the public interest than if the same property were owned outright. The town's governing body has the legal right to purchase and sell property at will. I would be happier if the property to be donated in this case were dedicated to the public for the purpose of public access to the water, including building of appropriate facilities to support public access. An example of a restricted donation to the town is Lou-Mac Park. We should look at this model.

Appeasement in Oriental?

There were some curious aspects to last night's meeting of the Oriental Town Board.

1. Although many members of the public attended, apparently hoping to learn more about South Avenue property negotiations, only two members of the public commented during the comment period. Neither appeared to be enthusiastic supporters of the proposal as it apparently exists. Grace Evans reminded the Board that back in the 1980's when she served on the Board, the Board adopted a policy not to transfer any more street ends to private ownership.

2. Perhaps one of the reasons more members of the public did not speak is that the proposal received from Mr. Fulcher has never been introduced at a business meeting of the Town Board nor was it tabled at Tuesday's meeting. Neither has it been posted on the Town's official web site. Following the public comment period, the mayor gave an exposition of his views of the issue, but there was no explanation of the procedure to be followed in considering the proposal, and the facts provided were sketchy at best.

3. Comments by the mayor and a few by members of the board seemed to constitute a discussion, but No Motion Had Been Made. There should be no discussion without a motion. The board did vote on a motion to go into closed session to deliberate on negotiating strategy. But we still have no official introduction of the matter to be negotiated.

4. Most curious, the mayor spent about fifteen minutes (I didn't time it) explaining that an important benefit of the proposal is the intangible benefit of improved relations with the Fulchers and the Henrys. He implied that a history of strained relations between the Town and Mr. Fulcher and the Town and Mr. Henry was caused by the Town Board's insensitivity to the concerns of both families.

I think it is a mistake to personalize policy disagreements. It is the duty of the Town Board, acting as our governing body, to protect and defend the long term interests of the residents, acting in accordance with state law. To that end, the Town has adopted a zoning ordinance (GMO) and has accepted responsibility for public rights of way established under North Carolina law. These laws apply to everyone in the town. Equally.

I wasn't here at the beginning of policy conflict between the Town of Oriental and Mr. Fulcher or the conflict over right-of-way law with Mr. Henry. But I have read the files. The conflicts weren't personal - they were business.

Both Mr. Fulcher and Mr. Henry have been successful businessmen. There was a time when businessmen were seen as "hard-nosed," meaning rational in action, making decisions on the basis of cold, hard fact. And on the basis of both personal and business interests. It would be good for the Town Board to assume this is still true.

I hope the Town Board will pursue negotiations concerning South Avenue in the same spirit - that is, in a rational effort to pursue the best long-term interests of the citizens of Oriental, protecting public access and use of the water.

Fulcher Proposal Plan View

Here is the drawing that Mr. Chris Fulcher submitted to the town with his proposal for the town to close South Avenue and Avenue A, in return for which he would donate to the town 5,001.17 square feet of property as outlined in the bold marks. Included in that 5,001.17 square feet are 890 square feet within the South Avenue right of way (which, under his proposal would no longer be a public right of way).

Note that if the dock under construction were to become the new town dock, it would be very constraining for boaters on the southwest side of the dock. It would be much more comfortable for boaters if the distance from the dock to the edge of the property were the same to the southwest as it would be to the northeast.

By comparison, if the town were to build a dock centered on the South Avenue terminus, even taking into account the mandatory CAMA setback of 15 feet from adjacent riparian property owners, the town would have approximately 64 feet to work with. Even if the dock were to be 10 feet wide, that would leave 27 feet on each side for boaters to use without encroaching on the buffer, much less on the riparian boundary.

In short, Mr. Fulcher's proposal looks like a tight squeeze.

Another set of considerations relates to the effect of the town abandoning the South Avenue right of way on public access to the parcel Mr. Fulcher proposes to donate. The proposal appears to allow only a 20 foot access from the remaining public right of way into the parcel leading to the dock. Is this enough? What about parking? What about access needed to load boats?

A lot of things to consider.

The iPhone and America's Discontents

Yesterday's New York Times had a very informative article focused on why iPhones are made in China, not in America. And the answer is, it isn't just about price.

The article explains: "It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products."

In short, at least in Apple's case, it is about quality. And continuous improvement.

For the past two decades, Americans have been misled by a chorus of triumphalist pronouncements about the decline and fall of the Soviet Union. "See," we are told,"communism failed. It can't work. Only capitalism can work, everyone knows that."

Is that so? The last time I checked, the People's Republic of China had a communist government.


So how come they are taking over production of our goods from our industries?


I think they have been paying attention not to the thoughts of Mao, but to the thoughts of W. Edwards Deming.


Read the New York Times article.


I'll share more thoughts later.

What Does Government Do For Us?

I have been watching the Republican presidential debates with some sense of wonder. As in, I wonder what world the candidates inhabit.

When Ronald Reagan ran for president, he famously intoned: "government isn't the solution - government is the problem." The present batch of candidates takes this mantra to new levels.

It isn't true.

But we seem to have a national amnesia about the role of the federal government in fostering the degree of prosperity that we enjoy. The "Tea Party" and their adherents seem bent on destroying the structure that has built that prosperity.

An integral part of the attack on our general prosperity is an attack on the New Deal. This is nothing new. Republicans attacked the New Deal from the beginning and have been attempting to undo it ever since.

The attacks only began to achieve success in the late 1960's, after a generation came along with no personal memory of the Great Depression and the New Deal and no recollection of the poverty and backwardness of much of rural America before the New Deal.

I am old enough to have seen remnants of the poverty that preceded the New Deal and to have witnessed the transition to greater prosperity that the New Deal set in motion. Just last month I drove through rural Mississippi on highways built during the depression (my father worked on some of them), past schools built by the Works Progress Administration, along recreational waterways held in check by flood control projects. I drove past farms that wouldn't have electricity without the Rural Electrification Act of 1936.

Michel Hiltzik has published a timely book, The New Deal: A Modern History. Yesterday's edition of the on-line magazine, Slate, published a good review of the book and a summary, drawn from the book, of the New Deal's accomplishments. It is worth reading the review here.

It occurs to me that, by comparison to the visionaries who led America out of a very dark time in our history, today's Republicans have a cramped, crabby and very limited vision of our country.

But if we have eyes to see, here in Pamlico County, we see the New Deal at work. We have not been left to our own devices to recover from a major hurricane. Both as individuals and as a county and a state, we have been saved from total economic collapse by measures put in place by the New Deal. Without those measures, banks would have collapsed and even more jobs would have been lost.

Things could be a lot worse, and without the New Deal, they would be.

But the enduring accomplishment of the New Deal is that leaders of that effort had a vision of the future. That vision of Americans working together for progress and improvement dominated government planning and accomplishments for nearly half a century.

Let's not lose the vision.

Double Ten: China's Revolution

Today is the one hundredth anniversary of the beginning of the uprising that overthrew the Manchu Dynasty and established China as a republic under Sun Yat-sen.

The Republic of China (Taiwan) celebrates "Double Ten" as China's national day, as do many overseas Chinese in other countries. The event truly was crucial to China's eventual modernization and its transformation from a source of luxury goods (silk, tea and porcelain) to a modern industrial nation.

There were many obstacles and detours along the way, including the Opium Wars with England (1838-1842 and 1856-1860), the Tai Ping Rebellion (1850-1864), the Sino-Japanese War (1894-95) and the Boxer Rebellion (1898). These events led to the partition and control of China (at least the trading centers) by Western and eventually Japanese imperialist powers.

One of the goals of the 1911 uprising was for China to eventually reestablish control of her own territory and people.

It took a long time, but few can dispute that China has finally achieved that goal.

Not in a Depression - Yet

One of the reasons we are only in a recession and not in a depression is the existence of safety net programs put in place eighty years ago under FDR, supplemented by programs put in place nearly fifty years ago under LBJ. As a consequence, even though the percentage of the population with jobs is lower than at any time since the great depression, we don't have masses of people living in Hooverville's, rummaging through garbage dumps for sustenance.

Because of those programs, which Republicans opposed from the very beginning, not only have individuals and families been able to survive, businesses that would otherwise have had to close their doors have been able to stay open.

The scale of our programs is significant. Twenty percent of all personal income in 2010 came from government transfer programs. Just imagine the impact if those programs didn't exist.

Before the year is over, you may not have to imagine it. Some programs, such as extended unemployment insurance, are due to expire later this year. Some stimulus programs are also due to expire. Among measures proposed to reduce government spending are proposals to raise retirement age, raise the age of eligibility for Medicare and increase the costs paid by individuals.

As of now, it appears that neither party is pushing for measures to stimulate the economy, create jobs, thus increasing GDP and revenue, reducing the deficit by growing our way out of it.

So whatever results from the current budget negotiations, it looks like government spending will be reduced.

This will kill jobs.

In the long run, though, there are issues beyond aggregate demand that need attention. How do we address the jobs deficit in face of outsourcing offshore, computerization, or a combination of both. Where will our future jobs come from?

University of Texas economist James K. Galbraith has some thoughts on the subject in a recent essay published here by the New America Foundation.

The Age of Grand Undertakings

In September, 1929, the U.S. Stock market crashed. By 1932, as the depression set in, US industrial production had fallen nearly fifty percent, wholesale prices had fallen by a third, foreign trade was down by seventy percent and unemployment was up more than 600 percent.

In New York City, the corporation planning to build the world's tallest building continued with their plans and completed the building in 1931, a year and a half after construction began. Construction began on the largest reclamation project in the west, the Boulder Dam (later renamed Hoover dam) in 1931, with completion in 1936.Further west, in San Francisco, the Golden Gate Bridge and Highway District, authorized by an act of the California legislature, was incorporated in 1928 to design, construct, and finance the Golden Gate Bridge. After the crash, unable to raise construction funds, the District lobbied for a $30 million bond issue. The bonds were approved in 1930. Bank of America bought the entire issue in order to help the local economy.

Construction began January 5, 1933. It was finished by April 1937, $1.3 million under budget.

Further north, work began on the Grand Coulee Dam on the Columbia river in 1931. Later expanded in design, the project was completed in 1942 and provided hydroelectric power for wartime industries in the Pacific Northwest.

In 1934, the US Army Air Corps put out a bid for long range bombers. Less than a year later the first prototype B-17, which became the backbone of strategic air operations in World War II made its first flight.

About the same time, Congress authorized a new battleship. The keel of USS North Carolina was laid October 27, 1937. The ship was launched June 13, 1940 and put in commission April 9, 1941. Nine more fast battleships came behind her and served in World War II.

These were all grand undertakings. They were by no means the only grand undertakings in these years. In my native state of Oklahoma, the longest multiple arch dam was built on the Grand River to provide flood control and hydroelectric power.

Every one of these designs was created on paper by design engineers who did calculations by hand and with slide rules, made copies of detailed drawings using the blueprint process. Not a single digital computer was used, because none existed.

Where are our visionaries of today? All we hear is, "oh, we can't afford anything like that!"

Are we led by a generation of fraidy cats and wimps?

Baby Boomers Strike Again and Stay Put

It's no news that there have been few recent real estate closings in Oriental and elsewhere in Pamlico County.

The question is "why?" and "will this be a long term trend?"

Yesterday's Washington Post provided an explanation: retiring baby boomers are staying put and not moving to Florida, Nevada, and other sandy locations further south. Will this trend affect North Carolina and Pamlico County? I wouldn't bet against it.

So maybe we need to get busy with an economic development plan that recruits younger workers with families instead of more affluent retired folks who don't seem to be moving here any more anyhow.

Can Americans Make Anything Besides Deals?

Interesting column by Harold Meyerson in last week's Washington Post.

The question Meyerson addresses is whether the United States can learn from the example of others - in this case, Germany. The first part of the question is whether there is anything to be learned from other countries. Clearly there is.

The second part of the question is whether we are capable of learning from the successes of other countries. That's an open question.

Meyerson comments on the German model: "German manufacturers, particularly the midsize and small-scale ones that often dominate global markets in specialized products, don’t seek funding from capital markets (there’s a local banking sector that handles their needs) and don’t answer to shareholders. They make things, while we make deals, or trades, or swaps."

David Leonhardt, the New York Times economics columnist, wrote last week that Germany owed its edge in global competitiveness to a range of policies that could not be more different than ours: limiting home ownership, improving education (including vocational and technical education) and keeping unions strong — which is why “middle-class pay,” he noted, “has risen at roughly the same rate as top incomes.”

The German model differs from the laissez-faire approach to globalization that has dominated U.S. policy and discourse for decades, dooming many American workers to penury. Meyerson's article emphasizes the crucial distinctions between Germany’s stakeholder capitalism, which benefits the many, and our shareholder capitalism, which increasingly benefits only the few.

Can we learn from others? Let's give it a try.

Make White Water!

When a US Navy destroyer goes from one place to another at high speed, it stirs the water up and leaves a big rooster tail and wake.

One day in 1964, I was at the conn of USS Higbee (DD-806) when the commodore decided to exercise the destroyer squadron at tactical maneuvers. At one point, we were in a circular formation centered on the flagship, when he ordered us to rotate the formation axis. I checked the maneuvering board solution and realized we could simply alter course a bit, slow to about ten knots, and slide into the new station. Smooth.

Commodore Healy had different ideas. He called us on the radio. "Higbee," he said, "this is ComDesRon Three. Make White Water!"

In other words, he wanted us to speed up, turn in a tight circle, stirring up the water, and hurry into the new station. I ordered left full rudder, all ahead full, and did as he wished.

I learned from that experience that sometimes visible action is more important than subtlety.

As I look at the state of the economy and assess the recent jobs information, I see that we aren't creating jobs fast enough to keep pace with our growing population. We need to kick up a rooster tail and make white water!

Is anyone in Washington listening?

Debt Problem?

Suppose you could borrow money for ten years at a real interest rate of less than one percent? Even better, suppose you could borrow money for five years at an interest rate of less than zero? In other words, someone will pay you for you to borrow their money?

You'd probably think about borrowing that money and investing it in measures to improve your future wealth.

Strange as it seems, the US Treasury's real interest rate paid on inflation-protected securities is less than one percent for ten years and less than zero percent for five years. So why not borrow more at those rates and use the funds to stimulate jobs and reinvigorate the economy?

Ask the Republicans.

Is this what they mean by running the government like a business?

Jobs, Jobs, Jobs

Today's employment news isn't good.

Unemployment is up to 9.1%.

I hate to be a pessimist, but I'm not surprised. The stimulus plan (ARRA) wasn't big enough, and included too many tax reductions in lieu of direct government expenditures.

To understand why, you need to be familiar with three concepts:
A. Liquidity trap. That is when our national monetary authority reduced short term interest to zero, but banks aren't lending and companies aren't borrowing. We are in a liquidity trap. There are many reasons for this - companies, for example, aren't investing because they have no expectation that new customers will suddenly appear. Another reason is:
B. Liquidity preference. In uncertain economic times, companies prefer to hold liquid assets (that can be readily converted to money, like bonds) rather than illiquid assets, like real estate and other commodities;
C. Aggregate Demand. Classical economists have believed for nearly two centuries that there will never be an overall shortage of aggregate demand. Time and again they are proven wrong, but the belief persists. Our aggregate demand is way down because we have the lowest percentage of the population employed since the great depression.

The reason our recovery is stalled is that, in a liquidity trap only government expenditures have a realistic chance of overcoming liquidity preference, improving aggregate demand for goods and services, and therefore stimulating businesses to hire workers and invest in increasing productive capacity.

Businesses aren't refusing to invest because Democrats have hurt their feelings, as some seem to suggest.

Graduation Season and Job Prospects

I'm on the road this week and next week for graduation season. It's inspiring to see the shining, expectant faces of new graduates ready to take on the world.

But what if the world isn't ready for them?

I've been concerned for some time about the effects of increasingly sophisticated automation on top of offshore outsourcing on job prospects for Americans. Not long ago, I called attention to data showing the present recession has hollowed out jobs in the economy formerly filled by our great but diminishing middle class.

Is this a temporary phenomenon caused by the present recession? Or is it something more permanent - a structural change affecting everyone's future.

Right now, I think our economy is being made worse by austerity measures being pushed by [can I call them fools?] in the capitols of the world. But what of the future? We are said to be in a recovery. But statistics seem to show that the percentage of Americans who are employed is at a historic low, and newly created jobs aren't appearing quickly enough to increase that percentage.

I just came across a sobering blog discussion of the long term effect of automation here. The author criticizes my two favorite macroeconomists for failing to address this problem.

I think it is a fair criticism.

I played a modest role about twenty-five years ago in a project intended to replace skilled technicians with an artificial intelligence program aboard US Navy ships. It had great potential to reduce the education and training required for maintenance technicians.

Next week I will travel to the graduation ceremony for our oldest grandchild at one of America's finest Universities. I worry that the kind of development I worked on years ago may affect his prospects and those of his younger brother.

The issue of how we can make a prosperous future for our descendants in the face of these rapid technological developments needs the urgent attention of our best economists.

Did the Luddites have a point?

Pamlico County Education Budget

At last night's meeting of the Pamlico County Board of Commissioners, Dr. Coon, Superintendent of Education, presented a report on next year's budget.

The report was not only grim, but also uncertain. The bottom line is that the county's education budget for the coming year will be down to what it was in 2005. There will be layoffs. Some programs will be terminated. Class sizes will increase and many teacher's aides will be laid off. For the fourth year in a row, teacher salaries will decrease. On top of that, teacher take-home pay will be reduced $2800 to $3200 for health insurance deductions. Other staffing positions will be eliminated.

There is no way these reductions can help but reduce the quality of education in the county.

The new North Carolina state legislature has decided to reduce funding for education at all levels well beyond the governor's recommendation.

Even so, the situation need not be so dire if the US Congress would reestablish the stimulus program, and this time set it at a sufficiently high level to do some good. Not that the ARRA stimulus didn't create jobs and prevent others from being lost - it just wasn't big enough to create adequate demand to counter the effects of the Great Recession. And monetary policy can't help, since the short term interest rate is at the zero bound. Can't go lower.

What is really going on here? Dean Baker, co-director of the Center for Economic and Policy Research, calls attention to a study by two Dartmouth economists and explains:

"This is hugely important for macro-policy debates because it suggests that more stimulus would provide a further boost to the economy and reduction in unemployment. This means that the only reason that we are sitting here with 25 million people unemployed and underemployed is that the politicians in Washington are too intimidated by the Wall Street deficit hawks.

The deficit hawks have used their enormous political power and control over the media to shut down any further discussion of stimulus. They have managed to completely dominate public debate with their brand of flat-earth economics. They are using the crisis that was created through their greed and incompetence to reduce hugely valued public benefits, like Social Security and Medicare. And, now they are using the crisis that they have created for state and local governments to destroy public sector unions.

This looks really awful because it is. Our nations' leaders are deliberately inflicting enormous pain on tens of millions of people to advance their political agenda. This new study helps to prove this fact."

The leaders he is referring to are overwhelmingly Republicans in Congress and in state legislatures and governors' mansions.

Governing is Prediction

My last post called attention to W. Edwards Deming's observation that management is prediction.

This is true of government as well.

Ideally, both elected officials and civil servants would take into account during policy deliberations some prediction of the effects of the policies. But how can the public follow the issues and know what are the intended or probable outcomes of government measures?

We have prognosticators. Pundits. Professional explainers and predictors. Some write for newspapers and magazines and some talk on television. Surely the most influential of these pundits are the ones whose punditry is most accurate, right?

Not Exactly.

Recently a group of scholars in Public Policy at Hamilton University decided to examine the accuracy of prognostications by professional prognosticators, with interesting results.

This was not a ground breaking study. A more comprehensive twenty-year study of political and economic forecasting was summarized by Philip Tetlock in his book Expert Political Judgment. Tetlock's study was based on predictions by 284 experts on political and economic trends, and a subsequent analysis of the accuracy of the predictions. His findings:

-Extrapolation using mathematical models does better than human prediction
-Education and popularity increase the predictors' confidence but not their accuracy
-Prognosticators overpredict change and underpredict the status quo
-Extremists predict worse than moderates
-Some people predict better than others, even outside their area of expertise

The Hamilton study was more limited in time and scope, but focused on contemporary prognosticators. The most accurate prognosticator in their study was Paul Krugman of the New York Times. The least accurate was Cal Thomas. In general, they found that liberals were better prognosticators, especially if they had no law degree.

Management is Prediction

"The theory of knowledge helps us to understand that management in any form is prediction."

-W. Edwards Deming, The New Economics

Other Deming observations:

Knowledge is built on theory;

Use of Data requires prediction;

There is no true measurement without an operational definition;

Information is not knowledge.

Interdependent World

Bad news for China?

Harold Meyerson in today's Washington Post writes about China's bad economic news and what it may mean for us and Europe. In brief, the answer isn't simple. Worth reading.